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CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS1
The responsibilities of the Board of Directors of The Walt Disney Company
include oversight of the Company’s systems of internal control, preparation
and presentation of financial reports and compliance with applicable laws,
regulations and Company policies. Through this Charter, the Board delegates
certain responsibilities to the Audit Committee to assist the Board in the
fulfillment of its duties to the Company and its shareholders. As more fully
set forth below, the purpose of the Committee is to assist the Board in its
oversight of:
• the integrity of the Company’s financial statements;
• the Company’s compliance with legal and regulatory requirements;
• the qualifications and independence of the Company’s independent
auditors; and
• the performance of the Company’s independent auditors and of
the Company’s internal audit function.
Authority. The Committee shall be
given the resources and assistance necessary to discharge its responsibilities,
including appropriate funding, as determined by the Committee, unrestricted
access to Company personnel and documents and the Company’s independent
auditors. The Committee shall also have authority, with notice to the Chairman
of the Board, to engage outside legal, accounting and other advisors as it
deems necessary or appropriate.
Membership. The Committee shall
consist of three or more directors, who shall be appointed annually and subject
to removal at any time, by the Board of Directors. Each Committee member shall
meet the independence requirements established by rules of the Securities and
Exchange Commission and listing standards of the New York Stock Exchange, as
well as the independence standards set forth in the Company’s Corporate
Governance Guidelines.
All Committee members shall be financially literate, having a basic understanding
of financial controls and reporting. At least one Committee member shall also
have accounting or related financial management expertise, including at a minimum
the expertise required by rules of the Securities and Exchange Commission and
listing standards of the New York Stock Exchange.
No member of the Audit Committee shall receive directly or indirectly any
compensation from the Company other than his or her Directors’ fees and
benefits.
Procedures. The Committee shall
meet at least four times a year and may call special meetings as required.
Meetings may be called by the Chair of the Committee or the Chairman of the
Board. The presence in person or by telephone of a majority of the members
shall constitute a quorum. Meetings may be held at any time, any place and
in any manner permitted by applicable law and the Company’s Bylaws. Minutes
of the Committee’s meetings shall be kept. To the extent practicable,
the meeting agenda, draft minutes from the prior meeting and supporting materials
shall be provided to Committee members prior to each meeting to allow time
for review. The Committee shall have authority to create and delegate specific
tasks to such standing or ad hoc subcommittees as it may determine to be necessary
or appropriate for the discharge of its responsibilities. The results of the
meetings shall be reported regularly to the full Board.
Responsibilities. The Company’s
executive management bears primary responsibility for the Company’s financial
and other reporting, for establishing the system of internal controls and for
ensuring compliance with laws, regulations and Company policies. The Committee’s
responsibilities and related key processes are described below. From time to
time, the Committee may take on additional responsibilities, at the request
of the Board.
(a) Financial Reporting. The
Committee shall monitor the preparation by management of the Company’s
quarterly and annual external financial reports. In carrying out this responsibility,
the Committee shall:
• review with management the significant financial reporting issues,
judgments and estimates used in developing the financial reports, including
analyses of the effects of alternative GAAP methods on the financial statements;
• review the accounting and reporting treatment of significant transactions
outside the Company’s ordinary operations;
• review with management and the Company’s independent auditors
significant changes to the Company’s accounting principles or their application
as reflected in the financial reports;
• review with management and the Company’s independent auditors
the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the financial statements of the Company;
• meet periodically with the Company’s independent auditors (in
private, as appropriate) (a) to review their reasoning in accepting or questioning
significant decisions made by management in preparing the financial reports;
(b) to review any audit problems or difficulties and management’s response;
(c) to review any outstanding disagreements with management that would cause
them to issue a non-standard report on the Company’s financial statements;
(d) to examine the appropriateness of the Company’s accounting principles
(including the quality, not just the acceptability, of accounting principles)
and the clarity of disclosure practices used or proposed; (e) to determine
if any restrictions have been placed by management on the scope of their audit;
and (f) to discuss any other matters the Committee deems appropriate;
• meet periodically in private with the Company’s management;
• review earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies and discuss their
appropriateness with management and the Company’s independent auditors,
paying particular attention to any use of “pro forma” or “adjusted” non-GAAP
information; and
• review draft quarterly and annual financial statements and discuss
their appropriateness with management and the Company’s independent auditors,
including the Company’s disclosures under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”
(b) Relationship with Independent Auditors. The
Committee shall bear primary responsibility for overseeing the Company’s
relationship with its independent auditors. In carrying out this responsibility,
the Committee shall:
• be directly responsible for the appointment, compensation, retention
and oversight of the work of the Company’s independent auditors, in consultation
with the full Board;
• review the scope and extent of audit services to be provided;
• review the overall audit plan, including the risk factors considered
in determining the audit scope;
• review the independent auditors’ annual letter pursuant to Independence
Standards Board Standard No. 1, outlining all relationships that may impact
their independence;
• review with the independent auditors the extent of non-audit services
provided and related fees, and pre-approve any non-audit relationships;
• determine whether the Committee believes the outside auditors are
independent;
• review the responsiveness of the outside auditors to the Company’s
needs;
• at least annually, obtain and review a report by the Company’s
independent auditors describing the independent auditor firm’s internal
quality-control procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm, and any
steps taken to deal with any such issues; and (to assess the auditors’ independence)
all relationships between the independent auditors and the Company;
• at least annually, evaluate the auditors’ qualifications, performance
and independence and present its conclusion with respect to the auditors to
the Board of Directors;
• resolve any disagreements between management and the auditors regarding
financial reporting; and
• set clear hiring policies for employees or former employees of the
Company’s independent auditors.
(c) Internal Control. The
Committee shall have responsibility for overseeing that management has implemented
an effective system of internal control that helps promote the reliability
of financial and operating information and compliance with applicable laws,
regulations and Company policies, including those related to risk management,
ethics and conflicts of interest. In carrying out this responsibility, the
Committee shall:
• inquire of management, management auditors and the Company’s
independent auditors concerning any deficiencies in the Company’s policies
and procedures that could adversely affect the adequacy of internal controls
and the financial reporting process and review any special audit steps adopted
in light of any material control deficiencies and the timeliness and reasonableness
of proposed corrective actions;
• review significant management audit findings and recommendations,
and management’s responses thereto;
• meet periodically with management auditors in private session (without
the participation of management or the independent auditors);
• review management’s responses to recommendations for improving
internal controls in the independent auditors’ management letters;
• review the Company’s policies and practices with respect to
risk assessment and risk management;
• review the Company’s policies and practices related to compliance
with laws, ethical conduct and conflicts of interest;
• review significant cases of conflicts of interest, misconduct or fraud;
• review significant issues between the Company and regulatory agencies;
and
• review as appropriate material litigation involving the Company.
(d) Relationship with Management Auditors. The
Committee shall have responsibility for determining that the Management Audit
department is effectively discharging its responsibilities. In carrying out
this responsibility, the Committee shall:
• review and approve the Management Audit department’s charter;
• review the appropriateness of the funding, staffing and operational
independence of Management Audit; and
• review and approve the appointment or dismissal of the Vice President
of (or corresponding officer responsible for) Management Audit.
(e) Receipt of Complaints. The
Committee shall establish procedures for:
• the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls and auditing matters;
and
• the confidential, anonymous submission by employees of the Company
regarding questionable accounting or auditing matters.
(f) Preparation of Reports. The
Committee shall prepare and approve the Committee’s report included in
the proxy statement for the Company’s annual meeting of shareholders,
and such other reports as may from time to time be necessary or appropriate.
Annual Performance Review. The Committee
shall conduct an annual evaluation of its performance in carrying out its responsibilities
hereunder.
1As amended and restated on October 1,
2007.
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